Attention pension plan owners! This information is for you. As interest rates are rising, pension plan lump sum payouts are decreasing. Have you run your calculations lately? You may have noticed that the lump sum offer is going down.
Roughly 15% of private-sector workers have access to a traditional pension. Many companies that offer traditional pensions allow workers to take their benefits in a lump sum instead of an annuity. That annuity is typically a monthly payout.
The lump sum payout is calculated using a mathematical formula that includes interest rates. The higher the rates used, the smaller the payout to you. The Federal Reserve has raised interest rates at five straight meetings this year. There is talk of one more 1.25% lift before the year is over.
Interest rates do not directly impact the pension annuity (those monthly payments). Those payments are generally determined by a formula that includes age and years of service.
Rising interest rates can make it harder to choose between a lump sum or an annuity. Watch the video above to learn more about the action steps you can take today to help you make the best pension decision for you!
Source: CNBC.com
YouTube Video Link: https://www.youtube.com/watch?v=jVMJeKX94Gc&feature=youtu.be